FTSE350: Reform on the horizon for UK rail?

Looking back at 2018, it’s easy to see what might have prompted high-level action. We learnt in May that the latest East Coast franchise – operated by Stagecoach (STG) and Virgin Trains as ‘VTEC’ – was being terminated. A parliamentary review in September said the revenue projections underpinning VTEC’s bid had been “overoptimistic”.

Last May also saw the introduction of a new timetable for the Govia Thameslink Railway (GTR) network – a move engendering nightmarish disruption for commuters, and for operator Go-Ahead (GOG). True, a further timetable change in July was seemingly more successful. And the company has reached agreement with the Department for Transport to operate the GTR franchise until 2021. But GTR will make no profit from the franchise this financial year, and will have profits capped for the remainder of the franchise’s term. Plus, GTR will contribute £15m of funding for “passenger enhancements”.

Buses have created challenges too; FirstGroup’s (FGP) Greyhound bus service has continued to suffer, with cheaper flights tempting North Americans away from long-distance coach travel. Greyhound has now exited Western Canada, which should help to improve its future performance – although this withdrawal did engender restructuring costs within September’s half-year numbers, contributing to a widening of pre-tax losses from £1.9m to £4.6m.

In a similar vein, Stagecoach is selling its North American business – with completion expected by its April year-end. December’s interims revealed an £85.4m non-cash impairment charge to “reflect a revised view on long-term profitability” in the US.